Essex Schools Funding Formula Review

Just a very brief report from the June 2017 meeting of the finance review group. The Government has suggested that LAs move their funding formula closer to the proposed national funding formula (consultation results still awaited.) With this in mind, the LA had undertaken some modelling to show the impact on Essex schools of a £10k reduction in lump sum offset for some schools by the introduction of sparsity funding at the levels proposed in the DfE consultation. I support neither the reduction of lump sum nor the introduction of sparsity funding, and I am pleased to say that the group rejected the proposal to move towards the proposed national funding formula in this way. In any case, this would seem very premature given the current uncertainty around the national funding formula. I do hope that the Government soon releases the consultation response.

Today Schools Forum met to discuss our collective response to the national funding formula consultation. This has not yet been finalised, but is likely from the discussion today to revolve around the suggestion that the DfE uses LA averages to drive the NFF rather than the radical deviations from LA averages currently suggested. I have produced my own response at https://constantinides.net/2017/02/02/national-funding-formula/, and I would strongly encourage all readers of this blog to submit a response – feel free to use mine as a model.

The December meeting of Essex Schools Forum was held last week. The following issue may be of particular interest to readers of this blog. The schools block funding item was postponed due to the the DfE not yet having released national consultation responses on the national funding formula.

Schools Contribution towards Capital Maintenance

Readers of this blog will know that as a result of my intervention at a previous meeting, the £6k school contribution towards capital expenditure was changed to a per pupil amount of £40 per pupil, making the mechanism more equitable for small schools. At this meeting the LA proposed to raise this to £80 per pupil for those schools “not meeting their minimum maintenance requirements.” The idea would be that in order to qualify for £40 rather than £80, schools would need to show that they had done their best to keep their premises in a good state of repair, following a schedule of works outlined as an accompanying paper. I did not feel I could support this proposal, as £80 per pupil contribution is enough to bankrupt many small schools in Essex at the moment. Instead, I proposed that the LA consider a “carrot” rather than a “stick” approach to ensuring that schools follow a regular maintenance schedule. However, the vote on this matter was 4-2 in favour of the LA proposal (low numbers because only maintained schools are affected and hence could vote.) I did, however, secure the commitment of Schools Forum to review the efficacy of the proposal in terms of the number of such capital spends, to see whether this declines as hoped for, and to consider alternative “carrot” proposals. For now, the main thing that maintained schools need to do is to be aware of the list of maintenance tasks they should be undertaking, and ensure they have evidence against this list. The LA will circulate to all schools in due course. Schools Forum agreed to put back the implementation date from April 2017 to September 2017 to allow schools to understand the implications.

This morning, I attended the October meeting of Schools Forum in Chelmsford. Readers of this blog may be interested in the following highlights:

The Government has announced changes allowing LAs to retain funding from maintained schools in order to meet their statutory requirements currently funded by the slashed Education Services Grant. This will cost maintained schools in Essex about £3m from September 2017. Of course this means that services funded through this retained funding should only be used to support maintained schools, though I expect this will be hard to unpick in practice.

From April 2017, all maintained schools and any academies in MATs with a staffing bill of more than £3m will have their staffing costs increased by a further 0.5% due to the Government’s Apprenticeship Levy. Schools can spend this on apprenticeships, and – at the moment – training for staff, if done through an accredited scheme.

IDACI bands have been changed by the DfE. I suggested that we re-balance the weighting used, to follow the principled approach I proposed last time, which is now used in the Essex funding formula. This could be improved, as now we have a national distribution of pupils in each band to work from.

There was some concern expressed over the continued transfer of funding from the schools block to support overspending Early Years provision.

The change I proposed in May to the funding handbook detailing the Falling Roll fund has been implemented, but not yet published. The LA intends to publish this soon.

I learnt that the rules for a maintained school with a budget deficit converting to an academy differ depending on whether it is an academy converter or a sponsored academy. In the former case, the deficit stays with the academy whereas in the latter case the deficit stays with the LA. This seems very unfair.

Today was the last meeting of Schools Forum for the 2015/16 school year. Some issues to note are:

At the next (October) meeting of Schools Forum, the schools broadband service will be presenting a set of options for how to fund the service in the future. I asked them to ensure that per pupil funding for maintained schools was still an option. This was agreed, and several other members also spoke of the importance of per pupil funding for protecting small schools in Essex.

The contingency held by the LA allowing it to fund schools who use up all (or more) of their notional SEN budget on simply servicing the £6k per EHCP contribution to high needs provision has overspent in 15/16. I reinforced how important this fund is for primary schools in Essex, especially small schools with high volatility in % EHCP. Clare Kershaw and Yannick Stupples-Whyley confirmed that this arrangement will continue into the future. Clare stated that she viewed it as the LA’s statutory duty to ensure that such funding is available. For as long as the LA holds the purse strings, this should be of some small comfort to schools.

The change I proposed to the funding handbook detailing the Falling Rolls Fund has not yet been implemented, but is in the LA’s “to do” list.

There has not been a substantial change in school balances rolled over from 14/15 to 15/16 in the primary sector (anecdotally, I think this is because schools are saving for 16/17 and/or 17/18 when the crunch will hit). This is unlike the secondary sector, where the crunch has already hit, with a 38% reduction in rollover.

We received an interesting report from Ralph Holloway on this topic. It seems that out-of-county placements are on the decline, but the number of permanent exclusions is increasing rapidly, with as many pupils excluded this school year than the last two combined, which in turn was a threefold increase on 2012/13 data. The proposal was to allocate some high needs funding to establish enhanced provision for 64 pupils. However, as part of the discussion, I discovered that the current source of such funding – the Behaviour and Attendance Partnership – is drawn from de-delegation, and hence the bill entirely falls on maintained schools with academies effectively “opting out”. This is clearly unfair. I therefore proposed deletion from the recommendations of all mention of BAP funding, which was accepted.

Falling Rolls Fund Criteria

Readers of this blog will know that Essex has established a fund for schools with falling rolls where there is an expectation that this is a short-term blip. This fund is currently being used to supplement funding to a couple of secondary schools. I asked how schools were made aware of the existence of the fund and the criteria to access the fund, as it seems to be “word of mouth” that the moment. ASHE confirmed that secondaries knew about the fund. I requested that the funding handbook be updated to refer to the fund and its criteria, and this was agreed.

Potential Implications of a Schools National Funding Formula

We are currently between two phases of consultation over the proposed national funding formula. Readers can see my response to the first phase here, and the LA’s own response is not radically different in content from mine. Phase 2 of the consultation is expected at the end of June or early July, and I would strongly encourage schools to respond.

As an early estimate of the likely effect of a national funding formula on schools in Essex, the LA had prepared very early school level models under a variety of different circumstances:

All funding factors except AWPU funded at the average levels across all LAs in the country, AWPU determined by what remains in the Essex schools block funding.

AWPU funded at the average levels across all LAs in the country, all other factors set at Essex levels.

All factors except Lump Sum funded at the average levels across all LAs in the country, Lump Sum determined by what remains in the Essex schools block funding.

None of these look like good news for Essex small schools, with funding cuts of 8% to 29% in Year 1 of the national funding formula for one of our smallest schools, and with all schools bar one with fewer than 158 pupils losing revenue funding. However – don’t panic! – I don’t believe these models are realistic, for the following reasons:

The averaging process used for these models was to take the arithmetic mean across local authorities. In practice, this could lead to politically unacceptable radical shifts in the total education funding budget because authorities differ considerably in size. If the DfE does try to converge on average values, then to keep total funding unchanged they would need to average pupil-led factors on a per pupil basis and school factors (lump sum) on a per school basis rather than both on a per LA basis. I don’t, of course, believe they should use either approach, but rather fund lump sum as a genuine reflection of the fixed costs of running a school. But if they do go down the route of formulaic convergence, then a sensible approach would be to take the variation of school sizes into account when weighting the lump sum of a local authority – in LAs where schools are of similar sizes, lump sum value is far less important than in LAs where schools are of wildly differing sizes. Time will tell.

I don’t think the LA has changed the primary secondary funding differential to national average levels when calculating these figures. If that were to happen, then primary schools in Essex might see about a 3% uplift in funding which would partially offset some of the negative impact in the model.

The DfE is very keen on underpinning the pupil led factors. I therefore think that Model 1 is unlikely to be reflection of Government thinking. Equally, Model 2 seems unrealistic because I do expect a lump sum reduction after the introduction of the funding formula. Finally Model 3 seems unrealistic because it leads to a too significant reduction in Lump Sum, to only £78k for primary and £16k for secondary, again this would probably be unacceptable politically.

Minimum Funding Guarantee has been applied to these models, meaning that the expected losses over time will be even greater (I requested that the next time Schools Forum considers such models, we look at a version without MFG to see the long-term effect). I do expect a form of MFG / transitional funding to be applied by the national Government, but I doubt it will take the form of current MFG. In particular, the estimates presented assume that MFG does not protect lump sum at all, which makes sense if lump sum doesn’t change from one year to the next but does not make sense if lump sum were cut dramatically. Thus I don’t think the models presented are realistic in Year 1 (I expect more protection than that predicted) nor in the long term (I expect less protection than that predicted!)

In summary, while I think the LA has done the best it can with the information available to us at this stage, I’m not convinced that these school-level projections are meaningful at this stage. However, a simple back-of-the-envelope calculation would suggest that with an uplift of 3% due to an adjusted funding differential but a cut in lump sum of around £30-50k (a total guess on my part), schools with a budget of less than £1m are very likely to be losers. This is something all small schools need to get to grips with during and after the second consultation period. We will need to begin to lobby our MPs to ensure an appropriate lump sum value. Indeed, while the arithmetic mean lump sum across the LAs is lower than the Essex value, the modal lump sum is in line with ours – for good reason – we need to fight to keep it that way.

The long-awaited National Funding Formula is now being consulted over by the DfE. I would encourage all readers of this blog to submit a response (see here). For your reference when constructing your response, I have pasted my own response to any of the bits that are just not a plain “yes” below. Please get the word out and submit!

The December Schools Forum was held on Wednesday 9th December 2015 in Chelmsford. Readers of this blog may be interested in the following highlights:

There may be a consultation at some point in 2016 over the possibility of requiring maintained schools to pay for their own admissions appeals, delegating the centrally held money to schools for this purpose. In my view this would not be a positive step, and is likely to significantly penalise popular small schools. I asked that the impact on small schools be specifically modeled before coming up with any such proposals.

After some discussion, a decision was made to renew the Schools Broadband contract from September in order to ensure continuity of service. However, a full review of quality of service and alternative providers will take place over 2016.

There continues to be an issue with Essex’s very low “Guaranteed Unit of Funding” for EYFS places. Unless this issue is fixed by agreement between the LA and DfE in the new year, I fear that there will be non-negligible consequences for schools funding.

We received a report on the implications of the Government’s Comprehensive Spending Review. By far the most significant one is the planned 75% cut of the Education Services Grant. I asked which LA functions are funded through this grant. These include school improvement, statutory duties, LA planning, LA revenue budgeting, education welfare, and the cost of managing the capital programme. I think it is reasonable to expect the final demise of any vestige of LA school improvement work if this cut goes through.

When benchmarking against other LAs, Essex spends within the top quartile when it comes to SEN support services, but the bottom quartile in high needs budget and individual schools budget. Of course the move to a national funding formula announced in the Comprehensive Spending Review may change this. In my estimate, the major winners in Essex from a move to the national funding formula will be large primaries (due to the likely reduction in lump sum and the change in the primary:secondary funding differential) whereas the major losers in Essex will likely be small secondaries for the same reasons.

We received a detailed report from the Virtual School Head on the expenditure of Pupil Premium Plus for Looked After Children. Some 8.4% of LAC’s schools are not submitting a Personal Education Plan to access this funding. I queried the reason for this. The LA noted that LAC are often outside Essex and that some schools have problems managing the process, especially outside Essex. I queried the head of the Virtual School about the need to include a LAC element in the school funding formula. She suggested that she was happy with the £500 per child included in the 16/17 proposed funding formula.

The October meeting of Schools Forum was held on the 14th of October. Some issues of interest included:

Falling Rolls Fund. I have requested the operation of this fund be reviewed in order to ensure that it cannot be used solely to subsidise redundancy costs in a school that, while needing protection in the short term, has no long term plan to return to its existing number of pupils on roll. This was agreed, and will come back to a future meeting.

Schools Broadband. There was a lot of disquiet expressed about the level of service being provided by schools broadband. Schools broadband suppliers were asked to return with a report on this matter before further de-delegation from maintained schools could be approved.

School Effectiveness Plus. There was a request by EES for Schools Forum to fund some of the first two years of the new School Effectiveness Plus programme. EPHA was against this move, and so it did not proceed, but was instead referred back for further consultation.

School Funding Consultation. The changes previously discussed were approved. Very few schools sent in a response. The only question where there was considerable dissent was in EAL funding, however much of this appeared to be based on a misconception of what was being proposed – the LA is proposing to offer schools double the money for half the time, not to cut funding.

Funding for EPHA was approved, so schools will no longer have to pay local subscriptions.

School redundancy costs. I noted the LA’s paper on school redundancy costs, but disagreed with the LA’s interpretation of reasonable examples where costs should be allocated to a school in respect of costs incurred for the dismissal or for the purpose of securing the resignation of a member of staff at a maintained school. I emphasised that governors have a responsibility not only to set a balanced budget but to make efficient use of school funds, and the risk of deficit should not be used as an indicator of whether a school or the LA should bear these costs. The LA agreed to look again at this wording.